‘The economy is braking exhausting,’ says billionaire Barry Sternlicht

The U.S. economy is teetering getting ready to a critical downturn if the Federal Reserve would not pump the brakes on its charge hikes, billionaire CEO Barry Sternlicht mentioned.

The central financial institution has already raised rates of interest 4 instances this yr and is extensively anticipated to hike them by 75 foundation factors subsequent week in an effort to tame inflation. Earlier this week, client costs rose 0.1% as a substitute of the 0.1% decline economists surveyed by Dow Jones had been anticipating.

However, Sternlicht believes the Fed was late to the sport and is now being too aggressive.

“The economy is braking hard,” the chairman and CEO of Starwood Capital Group informed CNBC’s “Squawk Box” on Thursday.

“If the Fed keeps this up they are going to have a serious recession and people will lose their jobs,” he added.

Consumer confidence is horrible and CEO confidence is “miserable,” Sternlicht mentioned. Supply chain points are being resolved, and inventories at the moment are backing up in warehouses, which can result in enormous discounting, he mentioned.

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“The CPI, the data they are looking at is old data. All they have to do is call Doug McMillon at Walmart, call any of the real estate fellas and ask what is happening to our apartment rents,” he mentioned, mentioning that the speed of lease progress is now slowing.

The continuation of charge hikes may also trigger a “major crash” within the housing market, Sternlicht predicted. The once-hot actual property market is swiftly slowing down, with mortgage charges for a 30-year fastened mortgage over 6% — up from 3.29% in the beginning of the yr, in accordance with Mortgage News Daily.

While the Fed’s goal is 2%, inflation ought to run at 3% to 4%, Sternlicht mentioned.

“Inflation that is driven by wage growth is fabulous. We should want wages to go up,” he mentioned.

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“You can pay higher rents, you can buy your equipment, you can go to the restaurant if you have high wage growth.”

As for when the “serious recession” will hit, Sternlicht believes it is imminent.

“I think [in the] fourth quarter. I think right now,” he mentioned. “You are going to see cracks everywhere.”

Correction: Doug McMillon is CEO of Walmart. An earlier model misspelled his identify.

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